[Federal Register Volume 67, Number 250 (Monday, December 30, 2002)]
[Notices]
[Pages 79669-79670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32924]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47055; File No. SR-Amex-2002-110]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC To Increase the Maximum Number of Equity Securities Permitted To Be 
Linked to an ELN

December 19, 2002
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 19, 2002, the American Stock Exchange LLC (``Amex'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Amex. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to revise Amex Company Guide Section 107B to 
permit the listing and trading of notes linked to up to thirty (30) 
equity securities (``ELNs'').
    The text of the proposed rule change is available at the Office of 
the Secretary, the Amex, and the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Amex included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Amex has prepared summaries, set forth in sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    On May 20, 1993, the Commission approved Section 107B of the Amex 
Company Guide to provide for the listing and trading of equity linked 
term notes (ELNs), hybrid instruments whose values are linked to the 
performance of highly capitalized, actively traded common stock.\3\ 
ELNs are non-convertible debt of an issuer, whose value is based, at 
least in part, on the value of another issuer's common stock or non-
convertible preferred stock.
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    \3\ See Securities Exchange Act Release No. 32343 (May 20, 
1993), 58 FR 30833 (May 27, 1993) (SR-Amex-92-42).
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    Section 107B of the Amex Company Guide details the Amex's listing 
standards for ELNs. Specifically, Section 107B requires, among other 
things, that securities linked to ELNs (i) have a minimum market 
capitalization of $3 billion and during the 12 months preceding listing 
shown to have traded at least 2.5 million shares; (ii) have a minimum 
market capitalization of $1.5 billion and during the 12 months 
preceding listing shown to have traded at least 10 million shares; or 
(iii) have a minimum market capitalization of $500 million and during 
the 12 months preceding listing shown to have traded at least 15 
million shares.
    On March 27, 2000, the Commission granted authority to the Amex to 
list and trade notes linked to more than one equity security.\4\ Each 
of the underlying securities of an ELN is required to meet the 
standards for linked securities set forth in Section 107B. However, the 
2000 Order limited the basket of underlying securities that may be 
linked to an ELN to no more than twenty (20).\5\ Based on the its 
experience over the last two (2) years, the Amex believe that the limit 
of twenty (20) equity securities linked to an ELN is overly 
restrictive. Accordingly, the Amex proposes to amend the text of 
Section 107B to enable ELNs to be linked to up to thirty (30) equity 
securities provided that each linked equity security individually

[[Page 79670]]

satisfies the applicable standards set forth in Section 107B.\6\
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    \4\ See Securities Exchange Act Release No. 42582 (March 27, 
2000), 65 FR 17685 (April 4, 2000) (SR-Amex-99-42) (the ``2000 
Order'').
    \5\ See Id.
    \6\ The Amex notes that a recent proposal by UBS AG to list and 
trade Enhanced Appreciation Securities (the ``Notes'') on the Amex 
would be prohibited under current Section 107B because of the 
limitation of twenty (20) equity securities. These Notes, issued in 
amounts of $1,000 under the symbol ``EAN.B,'' will consist of a 
basket of thirty (30) common stocks each of which are component 
stocks of the Dow Jones Industrial Average (``DJIA''). Each 
component of the basket is equally weighted and will represent 
approximately 3.33% of the basket. The payment that an investor will 
receive at maturity is based on the return of each basket stock. For 
each positive return, the basket stock will be doubled subject to a 
maximum gain amount. Therefore, the maximum total return at maturity 
for each $1,000 principal amount of the Notes will be such maximum 
or ceiling amount. The Notes are also subject to full downside risk 
with a negative return reducing the cash payment at maturity. The 
Amex believes that the limitation of twenty (20) equity securities 
to be linked to an ELN such as these Notes is unduly restrictive 
because each linked security is highly capitalized and actively-
traded. In addition, the Amex submits that it lists and trades 
options, exchange-traded funds and index-linked notes based on the 
DJIA. These Notes are essentially linked to the DJIA with a 
different payout scenario at maturity.
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    The Amex submits that its proposal to increase the number of equity 
securities that may be linked to an ELN to thirty (30) will better 
reflect the competitive nature of attracting listings to the Amex. The 
Amex believes that expanding the basket of equity securities that may 
be linked to an ELN will enhance competition and benefit investors and 
the marketplace through additional product choices and alternatives. 
Amex also believes that there would be no investor protection concerns 
with expanding the number of equity securities that may be linked to an 
ELN from twenty (20) to thirty (30).
(2) Statutory Basis
    The Amex believes that the proposed rule change is consistent with 
Section 6(b) of the Act,\7\ in general, and furthers the objectives of 
Section 6(b)(5),\8\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of change, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Amex does not believe that the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and subparagraph (f)(6) of Rule 19b-4 \10\ 
thereunder because the Amex has designated the proposed rule change as 
one that does not: (i) significantly affect the protection of investors 
or the public interest; (ii) impose any significant burden on 
competition; (iii) become operative for 30 days from the date on which 
it was filed, or such shorter time as the Commission may designate. At 
any time within 60 days of the filing of such proposed rule change, the 
Commission may summarily abrogate such rule change if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    Under Rule 19b-4(f)(6)(iii) of the Act,\11\ the proposed rule 
change does not become operative for 30 days after the date of its 
filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest and 
the Amex is required to give the Commission written notice of its 
intention to file the proposed rule change at least five business days 
prior to filing. The Amex has requested that the Commission waive the 
30-day operative date and the five-day pre-filing notice requirement in 
order for it to implement the proposed rule change on December 19, 2002 
to allow the Amex to list and trade UBS AG Enhanced Appreciation 
Securities (``EAN.B'') immediately. The Commission, consistent with the 
protection of investors and the public interest, has determined to 
waive the 30-day operative period as well as the five-day pre-filing 
notice requirement,\12\ and, therefore, the proposal is effective and 
operative upon filing with the Commission.
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the five-day pre-filing notice 
requirement and the 30-day operative period for this proposal, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Amex. All submissions should refer to File No. SR-Amex-2002-110 and 
should be submitted by January 21, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-32924 Filed 12-27-02; 8:45 am]
BILLING CODE 8010-01-P